So, you’ve saved your 20% deposit (or you’ve saved a 10% deposit and you’re now ready to apply for a Home Loan). Congratulations! That’s a great achievement and you’re well on your way towards buying a property. But, much as we hate to dampen your enthusiasm, there are a few other things you’ll need to budget for before you’re ready to make the leap! Solicitor, valuer, building inspector – there are a few other home-buying costs to expect when buying your first home.
Firstly, a good solicitor is essential. They’re a key part of the process, performing all the legal ‘conveyancing’ work required to legally transfer ownership of a property. It’s a wise idea to choose a solicitor before you make any offers – that way they can talk to you about what to expect in a sale and purchase agreement, and perhaps suggest some conditions for you to include. Once you’ve made an offer, they’ll check the legal document, perform any LIM and title checks included in the conditions, and arrange any KiwiSaver contributions. They’ll do the official behind-the-scenes work of confirming your offer and paying the deposit when the conditions are met, and arranging the drawdown of your mortgage and payment of the remainder of the purchase price on settlement day. You can expect to pay somewhere in the ballpark of $1,500 to $2,000 for their services. If you require any extra services like a will, trust or power of attorney, etc., then there may be an additional cost. It depends on the firm, so it’s best to check before engaging your solicitor.
As a condition of your lending, you may be required to obtain a registered valuation of the property you want to purchase (particularly if your deposit is less than 20%). A registered property valuer must have a formal qualification in property – and experience in the industry – before they become registered. If you employ one, they will inspect the property and value it within the context of the market and other sales in the neighbourhood, providing a written report of their findings. The cost for a registered valuation is typically around $600 to $700 and is paid by the customer (i.e. you) and not the bank. It is very important to check with your mortgage adviser before engaging a valuer, as most of the banks these days have their own preferred valuation system.
We also recommend obtaining a professional building inspection of the property you hope to buy. While it may be tempting to skip the inspection when you’re eager to get into a new home (and trying to avoid any additional expenses!), it can save you big money down the track. In some parts of the country, earthquakes in recent years may have caused damage that has not been properly repaired; in other areas, ‘leaky building syndrome’ is a major issue. And, no matter where you are purchasing, deferred maintenance, unseen leaks and rotting timber can wreak havoc down the track if they are not addressed. Make sure that you hire a professional building inspector to do the job. Though well-meaning friends and family members may offer to look over the property for free (or next to nothing), they may not have the correct tools and experience to find issues that aren’t visible to the naked eye. The cost of hiring a professional (usually around $600 to $700) is well worth it when you consider how much money you could potentially save. And, remember, if a property inspection report was a condition of your sale and purchase agreement, and unexpected issues are discovered before confirmation, you may be able to renegotiate the purchase price to cover the cost of repairs.
For those fortunate enough to be applying for finance with a 20% deposit, your lender may contribute some money towards these costs. But generally those with less than 20% deposit will find these sorts of bonuses don’t apply, so you’ll need to make sure you can cover the costs yourself. Talk to Nathan Miglani - Mortgage Broker about creating a budget that takes these additional expenses into account.